Sports Betting Math: Variance, Regression & More
Variance is inevitable in sports betting, but managing it and leveraging other advanced mathematical concepts can make all the difference in your long-term profitability. Bettors who understand concepts like variance, regression to the mean, and standard deviation are better equipped to manage risk and fine-tune their betting strategies.
This article will dive deep into the math behind sports betting, providing you with the tools to refine your strategy. By understanding and using these concepts, you can make better betting predictions, manage variance more effectively, and improve the overall efficiency of your betting process.
What is Variance in Sports Betting?
Variance refers to fluctuations in betting results over time. Natural ups and downs are inevitable. Random events, such as unexpected injuries or underperforming teams, cannot be predicted. While it’s easy to get discouraged by losing streaks or overexcited by winning streaks, variance is an unavoidable part of sports betting that needs to be understood and managed for long-term success.
Why Variance Matters:
Uncertainty in Outcomes: Even if you’re consistently making +EV bets, variance means that the results of those bets can fluctuate in the short run. Long-term profitability doesn’t mean winning every bet but making consistent decisions that lead to positive results over time.
Risk Management: Bettors who fail to understand variance often overreact during losing streaks or chase bets during winning streaks. Understanding variance helps you stay disciplined and stick to your betting strategy despite short-term fluctuations
Example: If you place 10 bets with a +EV strategy, variance might cause you to lose 3 or 4 of those bets in a row. Understanding variance allows you to manage expectations and stay committed to your strategy, knowing that the long-term results will reflect the true value of your bets.
Regression to the Mean and Betting Predictions
Regression to the mean means extreme results will revert to average over time, helping you avoid overreacting to short-term trends and predicting when performance will return to normal levels.
Why Regression to the Mean Matters:
Predicting Outcomes: If a team has been winning by large margins or a player has been performing above their career average, regression to the mean suggests that they are likely to perform closer to their true average moving forward.
Avoiding Overreaction: Bettors who understand regression to the mean are less likely to be influenced by short-term trends or media hype. Instead, they focus on the long-term averages to make more informed betting decisions.
Example: If a soccer team has been winning every match with a scoreline of 3-0, but the expected average scoreline should be 1-0, regression to the mean suggests the team is likely to return to more average results in their next matches, even if they don’t lose outright.
Advanced Statistical Concepts in Sports Betting
Beyond variance and regression, other advanced statistical concepts provide potent tools for betting analysis. Concepts like probability theory, hypothesis testing, and statistical distributions help bettors understand the likelihood of various outcomes and make more data-driven decisions.
Key Concepts to Focus On:
Probability Theory: Understanding how probabilities work in betting is key to determining whether a bet offers value. If you can calculate the true probability of an event and compare it to the implied probability from the odds, you can find +EV bets.
Hypothesis Testing: This helps assess and adjust your betting predictions based on the results you see over time.
Statistical Distribution: A statistical distribution, such as normal distribution, helps you assess the likelihood of various outcomes based on historical data and how outcomes may vary.
Example: A bettor using probability theory might calculate that the implied probability of a team winning at -110 odds is 52.4%, but based on their model, they believe the true probability of the team winning is 58%. This shows a +EV opportunity.
What is Standard Deviation and Why Does It Matter in Betting?
Standard deviation helps you adjust bet size based on volatility. Risk-tolerant bettors might bet more on higher-variance markets (like player props), while risk-averse bettors may prefer lower-variance bets (like moneylines).
Why Standard Deviation Matters:
Managing Risk: Knowing the standard deviation of your bets helps you understand how much volatility to expect in your betting results. Bettors who understand standard deviation can adjust their bet size and strategy for higher volatility.
Risk-Tolerant vs. Risk-Averse Bettors: Risk-tolerant Bettors may place bets with higher standard deviation. In comparison, risk-averse bettors may place bets with lower standard deviation to reduce their exposure.
Example: A bettor placing high standard deviation bets might experience larger fluctuations in their bankroll, while a bettor with low standard deviation bets will experience less volatility, but potentially smaller wins.
